By Jon Marcus for The Hechinger Report.
Broadcast version by Nadia Ramlagan for Kentucky News Connection reporting for The Hechinger Report-Public News Service Collaboration
Emma Bittner considered getting a master’s degree in public health at a nearby university, but the in-person program cost tens of thousands of dollars more than she had hoped to spend.
So she checked out master’s degrees she could pursue remotely, on her laptop, which she was sure would be much cheaper.
The price for the same degree, online, was … just as much. Or more.
“I’m, like, what makes this worth it?” said Bittner, 25, who lives in Austin, Texas. “Why does it cost that much if I don’t get meetings face-to-face with the professor or have the experience in person?”
Among the surprising answers is that colleges and universities are charging more for online education to subsidize everything else they do, online managers say. Huge sums are also going into marketing and advertising for it, documents show.
Universities and colleges “see online higher education as an opportunity to make money and use it for whatever they want to make money for,” said Kevin Carey, vice president of education and work at the left-leaning think tank New America.
Online higher education is projected to pass an impressive if little-noticed milestone this year: For the first time, more American college students will be learning entirely online than will be learning 100 percent in person.
Bittner’s confusion about the price is widespread. Eighty percent of Americans think online learning after high school should cost less than in-person programs, according to a 2024 survey of 1,705 adults by New America.
After all, technology has reduced prices in many other industries. And online courses don’t require classrooms or other physical facilities and can theoretically be taught to a much larger number of students, creating economies of scale.
Yet 83 percent of online programs in higher education cost students as much as or more than the in-person versions, an annual survey of campus chief online learning officers finds. About a quarter of universities and colleges even tack on an additional “distance learning fee,” that survey found.
In addition to using the income from their online divisions to help pay for the other things they do, universities say they have had to pay more than they anticipated on advising and support for online students, who get worse results, on average, than their in-person counterparts.
Bringing down the price of a degree “was certainly a key part of the appeal” when online higher education began, said Richard Garrett, co-director of that survey of online education managers and chief research officer at Eduventures, an arm of the higher education technology consulting company Encoura.
“Online was going to be disruptive. It was supposed to widen access. And it would reduce the price,” said Garrett. “But it hasn’t played out that way.”
Today, online instruction for in-state students at four-year public universities costs $341 a credit, the independent Education Data Initiative finds — more than the average $325 a credit for face-to-face tuition. That adds up to about $41,000 for a degree online, compared to about $39,000 in tuition for a degree obtained in person.
Two-thirds of private four-year universities and colleges with online programs charge more for them than for their face-to-face classes, according to the survey of online managers. The average tuition for online learning at private universities and colleges comes to $516 per credit.
And community colleges, which collectively enroll the largest number of students who learn entirely online, charge them the same as or more than their in-person counterparts in 100 percent of cases, the survey of online officers found (though Garrett said that’s likely because community college tuition overall is already comparatively low).
Social media is riddled with angry comments about this. A typical post: “Can someone please explain to me why taking a course online can cost a couple $1000 more than in person?”
Online education officers respond that online programs face steep startup costs and need expensive technology specialists and infrastructure. In a separate survey of faculty by the consulting firm Ithaka S+R, 80 percent said it took them as much time, or more, to plan and develop online courses as it did in-person ones because of the need to incorporate new kinds of technology.
Online programs also need to provide faculty who are available for office hours, online advisors and other resources exclusively to support online students, who tend to be less well prepared and get worse results than their in-person counterparts. For the same reasons, many online providers have put caps on enrollment, limiting those expected economies of scale.
“You still need advisers, you still need a writing center, a tutoring center, and now you have to provide those services for students who are at a distance,” said Dylan Barth, vice president of innovation and programs at the Online Learning Consortium, which represents online education providers.
Still, 60 percent of public and more than half of private universities are taking in more money from online education than they spend on it, the online managers’ survey found. About half said they put the money back into their institutions’ general operating budgets.
Such cross subsidies have long been a part of higher education’s financial strategy, under which students in classes or fields that cost less to teach generally subsidize their counterparts in courses or disciplines that cost more. English majors subsidize their engineering classmates, for example. Big first-year lecture classes subsidize small senior seminars. Graduate students often subsidize undergrads.
“Online education is another revenue stream from a different market,” said Duha Altindag, an associate professor of economics at Auburn University who has studied online programs.
Universities “are not trying to use technology to become more efficient. They’re just layering it on top of the existing model,” said New America’s Carey, who has been a critic of some online education models.
“Public officials are not stopping them,” he said. “They’re not coming and saying, ‘Hey, we’re seeing this new opportunity to save money. These online courses could be cheaper. Make them cheaper.’ This is just a continuation of the status quo.”
Another page that online managers have borrowed from higher education’s traditional pricing playbook is that consumers often equate high prices with high quality, especially at brand-name colleges and universities.
“Market success and reputation can support higher prices,” Garrett said. It’s not what online courses cost to provide that determines the price, in other words, but how much consumers are willing to pay.
With online programs competing for customers across the country, rather than for those within commuting distance of a campus or willing to relocate to one, universities and colleges are also putting huge amounts into marketing and advertising.
An example of this kind of spending was exposed in a review by the consulting firm EY of the University of Arizona Global Campus, or UAGC, which the university created by acquiring for-profit Ashford University in 2020. Obtained through a public-records request by New America, the report found that the university was paying out $11,521 in advertising and marketing for every online student it enrolled.
The online University of Maryland Global Campus committed to spending $500 million for advertising to out-of-state students over six years, a state audit found.
“What if you took that money and translated it into lower tuition?” asked Carey.
While they’re paying the same as or more than their in-person counterparts, meanwhile, online students get generally poorer success rates.
Online instruction results in lower grades than face-to-face education, according to research by Altindag and colleagues at American University and the University of Southern Mississippi — though they also found that the gap is narrowing. Students online are more likely to have to withdraw from or repeat courses and less likely to graduate on time, these researchers found, which further increases the cost.
Another study, by University of Central Florida Institute of Higher Education Director Justin Ortagus, found that taking all of their courses online reduces the odds that community college students will ever graduate.
Lower-income students fare especially poorly online, that and other research shows; scholars say this is in part because many come from low-resourced public high schools or are balancing their classes with work or family responsibilities.
Students who learn entirely online at any level are less likely to have graduated within eight years than students in general, who have a 66 percent eight-year graduation rate, data from the National Center for Education Statistics shows.
Graduation rates are particularly low at for-profit universities, which enroll a quarter of the students who learn exclusively online. In the American InterContinental University System, for example, only 11 percent of students graduated within eight years after starting, federal data shows, and at the American Public University System, 44 percent. The figures are for the period ending in 2022, the most recent for which they have been widely submitted.
Several private, nonprofit universities and colleges also have comparatively lower eight-year graduation rates for students who are online only, the data shows, including Southern New Hampshire University (37 percent) and Western Governors University (52 percent).
If they do receive degrees, online-only students earn more than their entirely in-person counterparts for the first year after college, Eduventures finds — perhaps because they tend to be older than traditional-age students, researchers speculated. But that advantage disappears within four years, when in-person graduates overtake them. In addition to Eduventures, the survey was conducted by two other nonprofits, Quality Matters and Educause.
For all the growth in online higher education, employers appear to remain reluctant to hire graduates of it, according to still other research conducted at the University of Louisville. That study found that applicants for jobs who listed an online as opposed to in-person degree were about half as likely to get a callback for the job.
How strongly consumers feel that online higher education should cost less than the in-person kind was evident in lawsuits brought against universities and colleges that continued to charge full tuition even after going remote during the Covid-19 pandemic.
Students had part of their payments refunded under multimillion-dollar settlements with the University of Chicago, Pennsylvania State University, Rensselaer Polytechnic Institute, the University of Maine System and others.
Yet students keep signing on. For all the complaining about remote learning at the time, its momentum seems to have been speeded up by the pandemic, which was followed by a 12 percent increase in online enrollment above what had been projected before it hit, according to an analysis of federal data by education technology consultant Phil Hill.
Online students save on room and board costs they would face on residential campuses, and online higher education is typically more flexible than the in-person kind.
Sixty percent of campus online officers say that online sections of classes tend to fill first, and nearly half say online student numbers are outpacing in-person enrollment.
There have been some widely cited examples of online programs with dramatically lower tuition, such as a $7,000 online master’s degree in computer science at the Georgia Institute of Technology (compared to the estimated nearly $43,000 for the two-year in-person version), which has attracted thousands of students and a few copycat programs.
There are also early signs that prices for online higher education could fall. Competition is intensifying from national nonprofit providers such as Western Governors, which charges a comparatively low average $8,300 per year, and Southern New Hampshire, whose undergraduate price per credit hour is a slightly lower-than-average (for online courses) $330.
Universities have started cutting their ties with for-profit middlemen, called online program managers, who take big cuts of up to 80 percent of revenues. Nearly 150 such deals were canceled or ended and not renewed in 2023, the most recent year for which the information is available, the market research firm Validated Insights reports.
Another thing that could lower prices: As more online programs go live, they no longer require high up-front investment — just periodic updating.
“It is possible to save money on downstream costs if you offer the same course over a number of years,” Ortagus said.
While that survey of online officers found a tiny decline in the proportion of universities charging more for online than in-person classes, however, the drop was statistically insignificant. And as their enrollments continue to plummet, institutions increasingly need the revenue from online programs.
Bittner, in Texas, ended up in an online master’s program in public health that was just being started by a private, nonprofit university, and was cheaper than the others she’d found.
Her day job is at the national nonprofit Young Invincibles, which pushes for reforms in higher education, health care and economic security for young Americans. And she still doesn’t understand the online pricing model.
“I’m so confused about it. Even in the program I’m in now, you don’t get the same access to stuff as an in-person student,” she said. “What are you putting into it that costs so much?”
Jon Marcus wrote this article for The Hechinger Report.
Support for this reporting was provided by Lumina Foundation.
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